At least 17 churches for sale in O.C.

When Lance Cook started a bible study group in the early 1990s, a small room in his surf shop was all the space he needed. Now, even 60,000 square feet isn't enough to house his sprawling church.

Calvary Chapel La Habra packs in as many as 800 worshippers for each of its two Sunday services, forcing some congregants into an overflow seating area. The interdenominational church also set up a shuttle service to accommodate those who cannot find parking in the lot.

Calvary Chapel La Habra is one of a growing number of Orange County churches looking for more space, a demand that has resurrected the near-lifeless market for religious facilities.

At least 17 houses of worship currently are for sale in Orange County. Many congregations put their properties on the market because they have outgrown their current spaces. Calvary Chapel La Habra, which is selling its building for about $8 million, is looking for a property roughly double its current size.

The renewed interest in church real estate has boosted selling prices across the county. The average price of religious facilities sold in Orange County was $173 per square foot in 2012, according to data provided to the Register by commercial real estate firm Cushman & Wakefield. That was up nearly 10 percent from the previous year and marked the first year-over-year increase since before the recession.

The religious market had been on the decline since the downturn, when many churches struggled to keep up with loan payments. During a period of unprecedented financial turmoil, dozens of religious organizations across Southern California lost their buildings to foreclosure.

The Crystal Cathedral became emblematic of the problems facing religious institutions after church leaders declared bankruptcy and were forced to sell their iconic glass-covered sanctuary in Garden Grove.

Some churches stillare struggling financially, but for many the worst has passed and growth is an option again.

"The market's very strong," said Aaron Mills, a Brea-based broker who handles church properties for Prudential California Realty.

"We're seeing a lot of churches that are well-established in a community outgrowing their space and looking to move into a larger space. There's a lot of newer congregations that have been leasing space at churches or community centers that are really interested in obtaining their first building."

Limited supply

Prices are on the rise in Orange County in part because there is still a limited supply of properties zoned for religious use, particularly at the higher end, said Eric Knowles, senior director of the religious facilities group for Cushman & Wakefield.

"In Orange County, finding a location with an approved conditional-use permit that has decent parking, there are a lot of congregations that want that," he said. "When a megachurch is looking ... for a facility, their options are few and far between."

Brokers in the religious market said property values are rising for many types of religious facilities, and that most of the properties currently listed are being sold by Christian organizations.

The largest property on the market in the county is the 100,000-square-foot Marywood Pastoral Center in Orange. The Roman Catholic Diocese of Orange is relocating from the campus, which sits on 15 acres, to the Crystal Cathedral, which the group bought for more than $57 million.

The diocese has started renovation work on the Crystal Cathedral that is expected to last until 2015, at which point the sanctuary will be consecrated as Christ Cathedral.

Knowles is representing Marywood, which is on the market for $27.5 million. He saidthe campus has already received several offers, including from a religious group in South Korea.

The property is approved for a variety of uses, Knowles said, including education, corporate retreats and, of course, religious activity.

"It is an iconic campus," he said. "Anybody who lives in Orange County knows of the Marywood center."

But it's not just the high-profile properties generating interest. Mills said he has already received multiple offers on a small Fullerton church that went on the market less than three weeks ago.

Some congregations on the hunt for new property are looking at more than just traditional houses of worship. The leaders of Calvary Community Church, which had spent more than 80 years in Placentia, ended up buying a 43,000-square-foot office building in a Brea business park in late 2011 to house their growing congregation. The organization had maxed out at its old 18,000-square-foot space, and the pastor decided to convert the office into a church.

"It's not a typical worship center," said pastor David Tebay. "But it will hold more people."

The church paid for the new property and subsequent upgrades through a combination of proceeds from the sale of its previous building and donations from congregants. Now, Tebay hopes to raise more than $2 million for a large-scale renovation of the administrative offices and sanctuary, and nearly double its seating capacity.

Architects say they are seeing an increase in religious property improvements as the economy has started to recover.

"We're seeing an upward trend of renovation," said Derek Johnson, vice president of business development for Building God's Way, an architecture firm that has worked on a number of Orange County projects. "We're really excited this year because we have so many churches that are in those early stages of design. Compared to two years ago or three years ago, the outlook is very good."

Strict lending requirements

One possible hurdle to a full-blown recovery for religious real estate could be the tight financing market.

Orange County is home to several of the largest and most prominent church lenders in the nation, including Evangelical Christian Credit Union in Brea. But industry experts say loans still are tougher to come by than they were before the recession.

"The lending requirements are stricter," said Aaron Gardner, a religious-facility appraiser in Lake Forest. "Their loan-to-values are tighter and the income to support the loans, (lenders are) looking at that tougher."

Early last decade, easy credit proved an irresistible temptation to many churches, and new construction boomed. That saddled a number of religious organizations with sizeable loan payments just as the economy turned south and rising unemployment left many congregants unable to keep making their regular donations.

"Churches got hit hard," said Jac La Tour, spokesman for Evangelical Christian Credit Union. "A lot of church members simply couldn't give as they had before. That translated for many churches into financial struggles."

Cook, of Calvary Chapel La Habra, said his church did not have any serious financial problems, but it has been "running lean" in response to the economic downturn. The church is relying more on non-paid staff. "We've got an unusually large number of volunteers," he said.

Some churches, though, have not fared as well. Evangelical Christian Credit Union has foreclosed on more than 40 church borrowers since 2007; it had never taken back a property before the recession.

The credit union recently created a department to help ministries that are struggling financially, and the move appears to be helping. La Tour said foreclosures are slowing: "The tide is turning."

Foreclosures are ebbing across Southern California. In 2012, the number of church foreclosures across the region fell by one-third to 14, while the number of default notices declined by nearly half to 43, according to data from Cushman & Wakefield. Orange County, meanwhile, had no foreclosures or defaults last year.

"Orange County is faring well in terms of paying their debt," Knowles said. "Churches are regaining their footing."

Evangelical Christian Credit Union had stopped lending to new customers during the downturn, but resumed that activity last spring. La Tour said the credit union has tightened its underwriting practices and now requires far more documentation of churches' finances.

"We did some new loans last year and anticipate doing more this year," he said. "But we want ministries to be sure that the loan is not going to negatively impact their ability to stay on mission."